Peter Pre­vos, 30 August 2009.

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Peter Pre­vos 2009, ‘Stra­tegic Man­age­ment and Serendip­ity’, hypotheticorp.org, web­log post, accessed 5 Feb­ru­ary 2012, <http://hypotheticorp.org/wp/research/essays/serendipity/>.

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Peter Pre­vos, (2009, August 30). Stra­tegic Man­age­ment and Serendip­ity [blog post]. Retrieved from http://hypotheticorp.org/wp/research/essays/serendipity/

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Peter Pre­vos. “Stra­tegic Man­age­ment and Serendip­ity” hypotheticorp.org n.p., 30 Aug. 2009. Web. 5 Feb. 2012

Life is unpre­dict­able and much of human cul­ture is in essence a means to deal with the unpre­dict­able. We can not know whether the next har­vest will fail, whether we still have a job next year or when we will die. Ancient sys­tems, such as astro­logy and other forms of divin­a­tion were developed to reduce uncer­tainty in people’s lives. After the era of enlight­en­ment, divin­a­tion was replaced by sci­ence and we now rely on weather fore­casters, med­ical pro­fes­sion­als, engin­eers and other pro­fes­sion­als to provide inform­a­tion to help us plan our lives.

What is true for life in gen­eral is also true for man­aging an organ­isa­tion. An organ­isa­tion is a group of people that are bound together through a com­mon goal. To increase the like­li­hood that organ­isa­tions achieve object­ives, they require man­age­ment, i.e. actions of mem­bers of the organ­isa­tion aimed at redu­cing uncer­tainty. One of the greatest uncer­tain­ties in busi­ness is the exist­ence of com­pet­it­ors and their intrinsic unpre­dict­able actions. Stra­tegic man­age­ment is a spe­cific kind of man­age­ment that seeks to reduce this uncertainty.

In this essay a tax­onomy of Schools of Thought in stra­tegic man­age­ment, as pro­posed by Henry Mintzberg (1990; 1999), is described. The dis­tinc­tion between pre­script­ive the­or­ies, such as those pro­pounded by Igor Ansoff and Michael Porter, and descript­ive schools of stra­tegic think­ing are dis­cussed. It is argued that an organ­isa­tion can not rely solely on formal pre­script­ive sys­tems to develop and imple­ment strategy and that an integ­rated approach is required to act stra­tegic­ally and increase the chances of success.

Socially con­struc­ted phe­nom­ena, such as reli­gion, cul­ture and man­age­ment are notori­ously hard to define. This is cer­tainly the case for busi­ness strategy and although many schol­ars have applied their intel­lect to this prob­lem, no con­sensus has thus far emerged (For­ster and Browne 1996; Mintzberg 1987). The most pro­duct­ive approach has been to move away from essen­tial­ist “Strategy is … ” type defin­i­tions that attempt to cap­ture strategy in one quint­es­sen­tial sen­tence. Mintzberg (1987) cri­ti­cises the reduc­tion­ist approach to strategy defin­i­tion by com­par­ing it with a group of blind sci­ent­ists describ­ing an ele­phant by touch alone. One says it is a  trunk, the other might focus on the legs, but nobody is able is to describe the ele­phant as a whole. To cir­cum­vent per­ceived issues with essen­tial­ist defin­i­tions, a phe­nomen­o­lo­gical view, describ­ing dif­fer­ent per­spect­ives of stra­tegic think­ing in a model or tax­onomy is preferred.

Sev­eral authors have pro­posed sys­tems to clas­sify stra­tegic approaches for busi­ness. For example, Igor Ansoff (1987) defined a mat­rix of four gen­eric strategies and Michael Porter (1980) defined three gen­eric strategies to achieve com­pet­it­ive advantage.

Igor Ansoff, often cred­ited as the Father of Stra­tegic Man­age­ment, star­ted his career as a math­em­atician and later moved into the field of man­age­ment (Hus­sey 1999). Mintzberg cred­its Ansoff as being instru­mental in the devel­op­ment of the Plan­ning School (Mintzberg and Lampel 1999). Being trained as a math­em­atician, it is not sur­pris­ing that Ansoff’s stra­tegic think­ing revolved around struc­ture and order. The sub­title of the first edi­tion of Cor­por­ate Strategy was “An ana­lytic approach to busi­ness policy for growth and expan­sion” (Ansoff 1987). The pro­cess of strategy for­mu­la­tion is, accord­ing to Ansoff, not a cre­at­ive activ­ity but a formal one, con­sist­ing of dis­tinct steps sup­por­ted by check­lists and other con­trol tech­niques (Mintzberg and Lampel 1999). Ansoff pub­lished a great deal on tur­bu­lent and dis­con­tinu­ous change (Hus­sey 1999). But Ansoff, think­ing like a math­em­atician, sought to con­trol the unpre­dict­ab­il­ity of the external envir­on­ment with check­lists, budgets and oper­at­ing plans. The real­ity he thus sought to con­trol is, how­ever, not phys­ical and pre­dict­able, but social and there­fore less likely to be con­trol­lable through ana­lytic means.

Almost two dec­ades after Ansoff pub­lished his first ideas on stra­tegic man­age­ment, Michael Porter came on the scene and quickly attained the status of man­age­ment guru. In his book Com­pet­it­ive Strategies, Porter (1980) argues that only three strategies exist which provide oppor­tun­it­ies of suc­cess. The dif­fer­ences between these strategies are in the stra­tegic advant­age sought from either cost or dif­fer­en­ti­ation and the tar­get aimed at (Speed 1989). Mintzberg and Lampel (1999) place the work of Porter in the Pos­i­tion­ing School, a pre­script­ive view on strategy pop­u­lar in the 1980s. In Porter’s view, strategy can be reduced to gen­eric pos­i­tion tak­ing based on formal ana­lysis of the external envir­on­ment. Because of the intu­it­ive appeal of Porter’s work, it quickly picked up by man­age­ment con­sult­ants, who pro­claimed it to be a sci­entific truth (Mintzberg and Lampel 1999). One often heard cri­ti­cism to Porter’s work is, how­ever, that it is lack­ing in empir­ical sup­port, using select­ive case stud­ies to make his point (Speed 1989).

Henry Mintzberg employs a more philo­soph­ical approach when he clas­si­fies stra­tegic busi­ness think­ing in ten Schools of Thought (Table 1), which he describes in their his­tor­ical and ideo­lo­gical con­text. Early the­or­ists, such as Igor Ansoff, focused on the ana­lyt­ical aspects of strategy form­a­tion. The first three schools in Mintzberg’s tax­onomy are there­fore pre­script­ive and focus on how strategy ought to be for­mu­lated. On of the major premises of the pre­script­ive schools is the ‘Per­form­ance Claim’, which states that the more an organ­isa­tion engages in sys­tem­atic stra­tegic plan­ning, the more likely it will res­ult in above aver­age returns. The pre­script­ive schools have been influ­en­tial in the dis­course of strategy for­mu­la­tion, but have failed to explain the pro­cess of strategy exe­cu­tion (Mintzberg 1990).

Later devel­op­ments in stra­tegic man­age­ment lit­er­at­ure moved away from the pre­script­ive approaches mod­elled on quant­it­at­ive exact sci­ences and their inher­ent pre­sump­tion of a con­trol­lable world. The descript­ive schools of thought are inspired on the qual­it­at­ive social and cul­tural sci­ences and study what busi­nesses actu­ally did to be suc­cess­ful in order for other organ­isa­tions to learn from their approaches. The descript­ive schools move from a focus on a-priori stra­tegic plan­ning to a-posteriori dynamic strategy for­mu­la­tion and exe­cu­tion. For prac­ti­tion­ers, the pre­script­ive schools of thought are very attract­ive, illus­trated by the ubi­quity of tools such as SWOT ana­lysis and gen­eric strategies, such as those developed by Ansoff (1987) and Porter (1980). The descript­ive schools are some­what prob­lem­atic for prac­ti­tion­ers of stra­tegic man­age­ment because they do not provide straight­for­ward recipes for suc­cess. Ana­log­ous to the Nat­ur­al­istic Fal­lacy in moral philo­sophy, where an ought can not be derived from an is, the descript­ive schools (strategy as an is) are not very suit­able for man­agers to determ­ine what stra­tegic decision ought to be made. The ques­tion raised by Mintzberg’s tax­onomy of stra­tegic thought and other sim­ilar tax­onom­ies is how aver­age prac­ti­tion­ers can determ­ine what strategy they should employ.

One of the major premises of the pre­script­ive schools of stra­tegic man­age­ment thought is the Per­form­ance Claim, which can be form­ally expressed as (Hill et al. 2004: 23):

Stra­tegic plan­ning, on aver­age, has a pos­it­ive impact on com­pany performance.

Miller and Car­dinal (1994) invest­ig­ated how firm size, cap­ital intens­ity and envir­on­mental tur­bu­lence influ­ences per­form­ance in firms with dif­fer­ent degrees of formal stra­tegic plan­ning. They found that cor­rel­a­tions between plan­ning and busi­ness res­ults show a fairly large fluc­tu­ation (-0.30 < r² < 0.71), but are skewed towards pos­it­ive per­form­ance. They also con­cluded that stronger planning-profitability cor­rel­a­tions emerge when firms face tur­bu­lent envir­on­ments (Miller and Car­dinal 1994). Rogers et al. (1999) invest­ig­ated whether the rela­tion­ship between stra­tegic plan­ning pro­cesses and organ­isa­tional per­form­ance depends on the con­tent of the strategy pur­sued and not just the extent of plan­ning. They con­cluded that formal stra­tegic plan­ning pos­it­ively influ­ences com­pany per­form­ance, as expressed in the Per­form­ance Claim. Miller and Car­dinal (1994) also sup­port the Per­form­ance Claim but argue that com­pan­ies typ­ic­ally only real­ise 63% of the poten­tial value of their strategy because of defects in plan­ning and exe­cu­tion. They provide a list of pos­sible causes of per­form­ance loss, but do not seem to recog­nise that unpre­dict­able events can neg­at­ively influ­ence per­form­ance and imply that any strategy can be real­ised, as long as planned and executed appropriately.

How­ever, some aca­dem­ics ques­tion the idea that formal stra­tegic plan­ning sys­tems are a suf­fi­cient con­di­tion to improve com­pany per­form­ance and argue that luck and serendip­ity play a crit­ical role in determ­in­ing com­pet­it­ive advant­age (Mintzberg 1979; Hart 1992; Hamel 1996). This cri­ti­cism is sup­por­ted by the fact that that the pre­script­ive view of strategy form­a­tion con­tains a logical incon­sist­ency. In pre­script­ive schools,  strategy is often defined as the actions a com­pany takes to attain super­ior per­form­ance (Hill et al. 2004). How­ever, when strategy is thus defined, the Per­form­ance Claim becomes a tautology:

Actions taken to attain super­ior per­form­ance, on aver­age, have a pos­it­ive impact on com­pany performance.

Another issue with pre­script­ive schools of thought is the pre­sumed caus­al­ity from plan to action to suc­cess. The defin­i­tion of strategy dis­cussed above expresses an intent (“Actions taken to attain … ”). This intent does, how­ever, not imply a causal link between plan­ning an action and suc­cess. Hamel (1996) argues that stra­tegic plan­ning, as prac­tised in busi­ness man­age­ment, is not stra­tegic at all. He claims that strategy devel­op­ment tends to be a reduc­tion­ist pro­cess, based on simple rules and heur­ist­ics, work­ing from the present to the future, rather than the other way around. The stra­tegic plan­ning pro­cess is largely extra­pol­at­ive and it is assumed that the future will resemble the past, an assump­tion that David Hume has shown to be irra­tional. Hamel there­fore emphas­ises the cre­at­ive aspects of stra­tegic man­age­ment and points out that it is not a rote pro­cess that can be instru­ment­al­ised in neat sys­tems, such as SWOT dia­grams and gen­eric strategies. Strategy is in the view of Hamel (1996: 71) a “quest that must be a sub­vers­ive revolu­tion to improve com­pany performance”.

Logical ana­lysis of the prin­ciples of the pre­script­ive schools of stra­tegic thought shows them to be invalid because the Per­form­ance Claim is tau­to­lo­gical. How­ever, the empir­ical fact of the Per­form­ance Claim holds at least some truth remains. This seem­ing con­tra­dic­tion emerges because the rela­tion­ship between plan­ning and organ­isa­tional suc­cess is more com­plic­ated than was assumed in the research. Firstly, the research only used com­pan­ies still in exist­ence, leav­ing out those that did employ stra­tegic plan­ning but nev­er­the­less failed. Secondly, without con­duct­ing fully con­trolled stud­ies it is near impossible to prove caus­al­ity between plan­ning and suc­cess. A pos­it­ive cor­rel­a­tion does not imply that plan­ning is the cause of busi­ness result.

Hart (1992) sum­mar­ises the dis­course between pro­ponents of strict formal plan­ning and those that stress the lim­its of this approach. He refers to formal plan­ning as the rational model for strategy for­mu­la­tion. The rational model advoc­ates to con­sider all avail­able altern­at­ives, identify and eval­u­ate all of the con­sequences of each altern­at­ive and then select the pre­ferred altern­at­ive. Research­ers chal­len­ging this approach argue that organ­isa­tions can achieve only lim­ited ration­al­ity because of indi­vidual cog­nit­ive lim­its, heur­ist­ics and biases in human judge­ment (For­ster and Browne 1996).

The pro­cess of strategy form­a­tion is, accord­ing to Mintzberg (1979), the inter­play between the formal inten­ded strategies and informal emer­gent strategies, medi­ated by lead­er­ship. He emphas­ises that strategy is not a fixed plan, nor does it change sys­tem­at­ic­ally at pre­arranged times at the will of man­age­ment. Mintzberg also emphas­ises the unpre­dict­ab­il­ity of the external envir­on­ment. An organ­isa­tion can find itself in a stable envir­on­ment for long peri­ods of time, without the need to change its strategy. Some­times the envir­on­ment can, how­ever, become so tur­bu­lent that even the best plan­ning tech­niques are use­less because of the high level of unpre­dict­ab­il­ity (Mintzberg 1979). This seems to con­tra­dict the find­ing of Miller and Car­dinal (1994) that stronger planning-profitability cor­rel­a­tions emerge when firms face tur­bu­lent envir­on­ments. This is not unex­pec­ted as those com­pan­ies that suc­cumbed to the tur­bu­lent envir­on­ment were not included in the research. This leaves the ques­tion whether to fol­low pre­script­ive or descript­ive schools of thought open. The most pro­duct­ive answer is that stra­tegic man­age­ment is a com­plex syn­ergy of a-priori inten­ded and a-posteriori emer­gent strategy and pos­it­ive com­pany per­form­ance is brought about by a com­bin­a­tion of both. Thus, although formal plan­ning is not a suf­fi­cient con­di­tion to obtain super­ior com­pany per­form­ance, it is most cer­tainly a neces­sary condition.

Research into strategy for­mu­la­tion has res­ul­ted in a pleth­ora of stra­tegic man­age­ment the­or­ies. The fun­da­mental dif­fer­ences between indi­vidual the­or­ies and the fact that they come and go in quick suc­ces­sion, sup­ports the claim that there is no firm sci­entific basis for the­or­ies of man­age­ment (Miller and Car­dinal 1994). Stra­tegic man­age­ment the­ory is an eclectic field with con­tri­bu­tions from mil­it­ary his­tory, engin­eer­ing, indus­trial eco­nom­ics, organ­isa­tional soci­ology, beha­vi­oural, cog­nit­ive and social psy­cho­logy, anthro­po­logy and polit­ical sci­ence (For­ster and Browne 1996). Stra­tegic man­age­ment is thus more aligned with social sci­ences than the exact sci­ences and as such needs a meth­od­o­logy suit­ing the unpre­dict­ab­il­ity of human beha­viour, rather than a rational model, feign­ing predictability.

Man­age­ment deals with human beings and their social inter­ac­tion and both the external and internal envir­on­ment are in a con­stant state of flux. Strategy will only improve per­form­ance if its for­mu­la­tion takes the fun­da­mental unpre­dict­ab­il­ity of the world into account. Strategy can not be for­mu­lated through rational sys­tems that model the real world. For­mu­lat­ing strategy is a con­tinu­ously devel­op­ing ‘nar­rat­ive’ between the organ­isa­tion and the external environment.

Stra­tegic plan­ning as a means to reduce uncer­tainty in organ­isa­tions is a young sci­ence in which many dif­fer­ent per­spect­ives have been explored. Fol­low­ing a tax­onomy based on descript­ive and pre­script­ive stra­tegic man­age­ment, it has been shown that a formal plan­ning approach by itself can not cause a com­pany to achieve above aver­age returns.

Although empir­ical research points towards a pos­it­ive cor­rel­a­tion between stra­tegic plan­ning and com­pany per­form­ance, these stud­ies suf­fer from meth­od­o­lo­gical prob­lems. This does, how­ever, not imply that stra­tegic plan­ning as a formal exer­cise is futile. Formal stra­tegic plan­ning is vital for prudent man­age­ment. Not as a means to define the course for years ahead, but as a way to be able to anti­cip­ate the unpre­dict­ab­il­ity of external influences.

Ref­er­ences

Ansoff, Igor (1987) Cor­por­ate strategy. Lon­don: Pen­guin Business

For­ster, J. and Browne, M. (1996) Prin­ciples of Stra­tegic Man­age­ment, chap. The evol­u­tion of stra­tegic man­age­ment thought. Mac­mil­lan, 21–50.

Hamel, Gary (1996) ‘Strategy as revolu­tion’. Har­vard Busi­ness Review (July–August): 69–82.

Hart, Stu­art L. (1992) ‘An integ­rat­ive frame­work for strategy-making pro­cesses’. Academy of Man­age­ment Review 17(2): 237–351.

Hill, W.L., Jones, Gareth R. and Galvin, Peter (2004) Stra­tegic man­age­ment: An integ­rated approach. Milton: Wiley.

Hus­sey, David (1999) ‘Igor Ansoff’s con­tinu­ing con­tri­bu­tion to stra­tegic man­age­ment’. Stra­tegic Change 8(7): 375–392.

Miller, C. Chet and Car­dinal, Laura B. (1994) ‘Stra­tegic plan­ning and firm per­form­ance: a syn­thesis of more than two dec­ades of research’. Acadamy of Man­age­ment Journal 37(6): 1649–1665.

Mintzberg, H. (1987) ‘The strategy concept I: Five Ps for strategy’. Cali­for­nia Man­age­ment Review 30(1): 11–24.

Mintzberg, Henry (1979) ‘Pat­terns is strategy form­a­tion’. Inter­na­tional Stud­ies of Man­age­ment and Organ­isa­tion IX(3): 67–86.

Mintzberg, Henry (1990) ‘Strategy form­a­tion: Schools of thought’. In James W. Fre­d­er­ick­son, ed., Per­spect­ives on stra­tegic man­age­ment. Harper Busi­ness, 105–235.

Mintzberg, Henry and Lampel, Joseph (1999) ‘Reflect­ing on the strategy pro­cess’. Sloan Man­age­ment Review 40(3): 21–30.

Porter, Michael E. (1980) Com­pet­it­ive strategy. Tech­niques for ana­lyz­ing indus­tries com­pet­it­ors. New York: The Free Press.

Rogers, Patrick R., Miller, Alex and Judge, Wil­liam Q. (1999) ‘Using inform­a­tion pro­cessing the­ory to under­stand planning/performance rela­tion­ships in thecon­text of strategy’. Stra­tegic Man­age­ment Journal 20(6): 567–577.

Speed, Richard J. (1989) ‘Oh Mr Porter! A Re-Appraisal of Com­pet­it­ive Strategy’. Mar­ket­ing Intel­li­gence and Plan­ning 7(5): 8–11.